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Fannie Mae, Freddie Mac executives get big housing bonuses

The office overseeing Fannie and Freddie had said it would adjust CEO-level pay. |
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Both Fannie and Freddie have long argued that they have to offer Wall Street-size paychecks to compete for the best private-sector talent. House Financial Services Committee Chairman Spencer Bachus (R-Ala.) introduced a bill in April to place the executives on a government pay scale, but it has yet to move out of committee.

FHFA’s acting director, Edward J. DeMarco, told Congress last year that the managers who were at the helms of the mortgage companies during the market collapse were dismissed but also argued that generous pay helps lure “experienced, qualified” executives able to manage upward of $5 trillion in mortgage holdings amid market turmoil.

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DeMarco told lawmakers he’s concerned that suggestions to apply “a federal pay system to nonfederal employees” could put the companies in jeopardy of mismanagement and result in another taxpayer bailout. He said the compensation packages at Fannie and Freddie are part of the plan to return them to solvency while reducing costs to taxpayers.

A March report by FHFA’s inspector general, however, found the agency “lacks key controls necessary to monitor” executive compensation, nor has it developed written procedures for evaluating those packages.

An FHFA representative said the agency is installing pay package recommendations outlined in the report. Currently, she wrote, the agency “carefully reviews all executive officer pay requests and considers suitability and comparability with market practice, after consulting with the Treasury Department in certain circumstances.”

Since both companies’ stock is worthless, bonuses are paid in cash, deferred bonuses and incentive pay rather than stock options. A key factor in determining those bonuses is how Fannie and Freddie performed in the loan modification program created by the administration, in addition to measures tied to financial and accounting objectives.

For example, Freddie Mac helped a mere 160,000 homeowners change their mortgages “in support” of the president’s Home Affordable Modification Programand contacted only 45 percent of eligible borrowers, according to SEC filings. The company itself has modified 134,282 of its own loans since the start of the program. Those measures determined a significant share — 35 percent — of deferred bonus salary and, to a lesser extent, “target incentives” for Freddie executives.

Fannie, which was involved in modifying 400,000 mortgages last year, also assessed executive payments based in part on how it administered HAMP.

President Barack Obama in the past has derided Wall Street “fat cats” for raking in seven-figure bonuses even though their banks and finance companies needed billions of dollars in government bailouts just to stay in business. Yet the White House so far has remained largely silent about comparable bonuses at Fannie Mae and Freddie Mac.

The congressional criticism over compensation follows other charges that DeMarco has been unwilling to throw a lifeline to homeowners plunged underwater when the market collapsed.

The government-sponsored firms have essentially filled the vacuum caused by an exodus from private lenders. But critics want the FHFA to embrace “principal write-downs,” in which lenders and, by extension, Fannie and Freddie, would have to forgive a significant portion of homeowners’ outstanding mortgages; the move, they argue, would be a major step toward restoring housing market stability and boosting the economy but would force the two companies to accept red ink on their balance sheets.

DeMarco has resisted plans to modify troubled mortgages, insisting it wasn’t part of his legal mandate to bring Fannie and Freddie to fiscal stability.

Both HAMP and a similar program, Home Affordable Refinance Program, were seen as having the potential to modify at least 3 million government-backed mortgages and refinance 4 million others. The results were disappointing, however: Just 1.7 million borrowers have been helped since the programs were launched two years ago.

Last week, the White House announced a plan to relax restrictions for the HARP refinance program, which lets homeowners in good standing refinance their mortgages at current rock-bottom interest rates. DeMarco, whom aides say had been studying a similar proposal, gave the plan his blessing — a rare point of agreement between him and the Obama administration.

CORRECTION: An earlier version of this story incorrectly described the process by which the federal government took over Fannie Mae and Freddie Mac. They were both placed in conservatorship under the supervision of the Federal Housing Finance Agency.

these inept fumblers should all be shot including the people that are approving these insane bonuses. How dare they waste our taxes and ask for more all the time. These idiots that parade on wall street should be in Wash DC. There you find the real crooks, not on wall street.

Fact Number One.............. It was liberal Democrats, led by Christopher Dodd and Barney Frank, who for years.....including the present year......denied that Fannie/ Freddie were taking big risks that could lead to a financial crisis.

The records regarding the contributions of Fannie/ Freddie to congressional candidates and lobbyists, estimated to be in the neighborhood of $200 million, are sealed.

In all these cases... the foreclosure rate went up and nobody who advocated those lower lending standards was ever punished politically......NOT one....Not Barney Frank....Not Chis Dodd....Not Gov. Cuomo.

We are NOT allowed any information from the Freedom of Information Act per ....OBAMA.

Only IN Government can they take money EARNED by Taxpayers and give it to losers.

My gain is mine and only mine.......... My loss is actually yours....... is their motto.

Here's an idea......forgive all VA loans instead of those who bought "too much house" for what they can afford.

Makes more sense than bailing out idiots who watched Cribs MTV and thought they deserved to have that kind of lifestyle.

Addendum: Upon re-reading my post it sounded like I was advocating for free stuff for vets.....I was responding to this part of the Politico story and failed to quote it.

"The government-sponsored firms have essentially filled the vacuum caused by an exodus from private lenders. But critics want the FHFA to embrace “principal write-downs,” in which lenders and, by extension, Fannie and Freddie, would have to forgive a significant portion of homeowners’ outstanding mortgages; the move, they argue, would be a major step toward restoring housing market stability and boosting the economy but would force the two companies to accept red ink on their balance sheets. "

"...bonuses as they gave themselves...at a time when most of these institutions were teetering on collapse and they are asking for taxpayers to help sustain them, and when taxpayers find themselves in the difficult position that if they don't provide help that the entire system could come down on top of our heads -- that is the height of irresponsibility. It is shameful."

I'm not understanding how these executives can get million dollar bonuses when they haven't even paid back taxpayers for the billion dollar bailouts. Shouldn't those bonuses be coming back to taxpayers????

Thats what is wrong with this country. CEOs drive companies in the ground and they STILL get bonuses! Thats a heck of an incentive program; can I get that same deal?